IBA REVIEW: MAYOR’S FY 2012 PROPOSED BUDGET · 16 Implement Recovery Auditing 500,000 17 Early Retiree Reinsurance Program (ERRP) 2,000,000 Total One-Time Resource Options: $ 4,500,000

IBA REVIEW:MAYOR’S FY 2012 PROPOSED

BUDGET

May 4, 2011

Office of the Independent Budget Analyst

Mayor’s Budget Approach

• FY 2012 funding needs total $73.2 M:• Deficit identified in February Five-Year

Outlook- $56.7 M• Plus $7.8 M in department technical

adjustments (including $5.4 M vacancy savings correction)

• Plus $8.7 M for restoring 8 browned-out Fire engines

2


Mayor’ Budget Approach

• Significant Issues Addressed Since Outlook:

• Retiree health care reform expected to reduce UAAL and ARC going forward

• COO issued revision to Outlook at Budget Committee March 16th adding three new $100 M bond issuances for a total of $500 M for next five years for deferred capital

3



• FY 2012 General Fund Revenue projections remain conservative:

Revenue

Source

FY 2009

Actual

FY 2010

Estimated

FY 2011

Projected

FY 2012

Proposed

Property Tax 3.8% -1.8% -2.7% 0.0%

Sales Tax* -5.6% -9.5% 5.5% 3.0%

TOT -11.9% -12.2% 9.4% 3.0%

* Reflects economic growth, not year-to-year growth in City revenues

Major General Fund Revenue Growth Rates

4



• FY 2012 Revenue Projections remain conservative:• Property tax is appropriately

conservative• Upward adjustments to sales tax and

TOT may be warranted based on growth in FY 2011

• Revisiting revenue projections for FY 2012 included on list of resource options

5



• Overview of FY 2012 General Fund Expenditures:• Salaries and Wages increased

$12.9 M overallAttributable to vacancy savings

correction and restoration of Fire engines

6



• Fringe Benefits increased by $1.2 M overall:Worker’s Compensation claims increased

$1.4 M, not in OutlookGeneral Fund ARC unchanged from FY

2011, down $1.6 M from Outlook$1.6 M for Long Term Disability Reserves

remains funded, treated differently from other reserves

7



• Overview of General Fund Expenditures:• Supplies and contracts reduced by $9 millionCouncil resolution requested 5-10 % reduction10% across-the-board taken for discretionary items

• Information Technology at $24.7 M is $900,000 less than FY 2011. $13.3 M is identified as discretionary- services not necessarily provided by SDDPC

• Other/CapitalElimination of Public Liability($5.7 M) and General Fund

Reserves ($3.5 M) contributions8



• Mayor’s Budget Balancing Actions:

9



• Ongoing Resources-$38.1 M:• Service/Position Reductions $19.7 M, 207 total positions154 positions in Library and Park and Recreation, 91

positions are filled• Reductions to NPE $9.0 M, 10% across-the-board reductions to supplies

and contracts• Cost recovery fees$5.3 MFour increased or new fees in Public Safety area

10



• Ongoing Resources:• Parking meter utilization program-

$1.1 M• Hold Harmless Residential/Small

Business- $1.4 M• RDA payment toward Convention

Center Phase II debt service-$2.0 M• SDMS profit sharing- $1.0 M

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• One-Time Resources-$35.1 M• Reserves holiday- $14.1 M• Fund balances-$10.9 M• Disaster recovery reimbursements-

$4.0 M• Federal stimulus dollars for Streets-

$6.1 M

12



• Issues Regarding One-Time Resources:• In the past, one-time resources were

tied to one-time expenditures; this information was not provided for FY’s 2011 or 2012

• One-time resources used in prior year have been appropriately removed each year

13



• Mayor forthright in stating that use of one-times will result in $41 M deficit next year

• We agree that in times of economic decline a balanced approach is needed

• Not enough alternative reductions to replace $35.1 M of one-times

14



• Comparing Budget to Council Resolution:• Mayor included nine of the 23 actions

requested by the Council• These nine actions generated

savings/new resources estimated at $29.2 M

• IBA looked to items not implemented by the Mayor as possible resource items for FY 2012

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IBA Focused List of Menu Options

In FY12

Budget?

Funding

Included Comments

18. Comprehensive review of all fund balances $9.9m

SDSME, Police Decentralization, Qualcomm,

Sick leave

47a. Transfer unclaimed funds in City Treasury to

the General Fund $1.0m

123. Expand use of marketing partnerships-

Only base of $0.5m included; no projected

expansion

145. Implement false alarm fees for Fire-Rescue

$0.9m

189. Five percent reduction to supplies and

services $9.0mReflects a 10% reduction in discretionary

supplies and contracts

200. RDA payment for Convention Center Phase

II debt service $2.0mApproved by Council/Agency on 3/29/11

14. Implement recovery auditing program - Plan to reflect revenue based on audit results

47b. Fire-Rescue resume billing and retroactively

bill for high-rise inspections - Revenue for charges going forward already in

budget; no retroactive billing (est. $1.0m)

61. Eliminate cell phones for non-emergency

personnel-

Up to $0.7m possible based on IBA estimate

102. Eliminate Management Flex Benefits - Up to $1.4m possible based on IBA estimate

142. Sale of underutilized real estate assets - Up to $8.0m possible based on sale of WTC

202. RDA repayment of General Fund debt - Up to $2.0m possible based on IBA estimate

1. Accelerate Managed Competition for refuse

collection-

Explore for FY 2013

11. Expand use of 4/10/5 work schedule - Explore for FY 2013

122. Impose mandatory furlough - Explore for FY 2013

COUNCIL BUDGET RESOLUTION - RESOURCE OPTIONS

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In FY12

Budget?

Funding

Included Comments

1. Recover costs associated with entertainment

permits for police-regulated businesses $0.3m

2. Acceleration of Publishing and Fleet Services

managed competition-

In process, savings to be reflected upon

implementation in FY 2012

3.Updating revenue projections $1.0m

Sales tax growth increased from 2.4% to 3%.

Additional review by IBA underway

4. Savings from permanent elimination of vacant

positions $5.1mOf 207 FTE eliminated, 57 were vacant full-time

positions. Assumes $90k/position.

5. Elimination of take home vehicles for City

employees

-

6. Review and potential revision of lease

payment formula for payments from the Golf

Enterprise Fund to the General Fund

-

Explore for FY 2013

7. Options for budget-neutral funding of the 9th

Council District in FY13-

FY 2013 budget issue; up to $1.6m possible

8. Reform of Retiree Health Care benefit-

Negotiations underway - $57m included in FY

2012, $39m less than full ARC payment

Total Funding Included in Mayor's Proposed Budget: $29.2m

COUNCIL BUDGET RESOLUTION - RESOURCE OPTIONS

Additional Items in Council Resolution

17



City Service Issues

In FY12

Budget?

Total

Funding Comments

1. Restoration of Fire Engine brown-outs $8.7m

Restores 4 engines July 1, 2011 and 4 engines

on January 1, 2012

2. Preservation of Police, Fire-Rescue, and

Lifeguard services-

No lifeguard services restored from past

reductions; new reductions in Police total

$3.5m, including elimination of 20 vacant

sworn position and 4 code compliance officers

3. Mitigation of Library, Park & Rec reductions

-

$13.9m and 154 FTE proposed for elimination

between both depts.; 50% reduction to

branch library and rec center hours

4. Fund City's deferred capital backlog

$7.4m

Debt service for initial $100m bond issuance

included; additional $100m bond issuance

proposed for FY 2012, with payments to

begin in FY 2013

COUNCIL BUDGET RESOLUTION - SERVICE PRIORITIES

18


Options for Revisions to Budget

• IBA approach to identifying options:• Actions in Council resolution not

implemented by Mayor• Resource options identified by the IBA

through our review of major expenditure categories and departments

• Changes to FY 2012 Budget since Outlook• All about choices and priorities- are these

items more important than Library and Park and Recreation hours?

19


Options for Revisions to Budget

• Options for addressing Park and Recreation and Library reductions in response to community concerns

• Phasing in Fire engines over two fiscal years rather than one to free up resources

• Alternatives for using of one-time resources

20

Options for Revision to Budget

Total Resources

1 Adjust FY 2012 Revenue Estimates $ 3,000,000

2 Expand Marketing Partnerships 500,000

3 Use Land Sales Revenue for Convention Center Phase II

Debt Service Costs

2,500,000

4 Eliminate Management Flex Benefits 1,400,000

5 Eliminate Cell Phones for Non-Public Safety Depts 400,000

Sub-Total: $ 7,800,000

6 Reduce Workers' Compensation Funding $ 1,400,000

7 Adjust Terminal Leave 400,000

8 Adjust Long Term Disability Reserve Amounts 1,600,000

9 Reduce Overtime for Non-Public Safety Departments 1,250,000

10 Reduce Training and Travel for Non-Public Safety

Departments

1,000,000

11 Reduce funding for Arts & Culture by 10% 620,000

12 Reprioritize Mayor & Council TOT Allocations 220,000

13 Reduce IT Discretionary Funding by 20% 1,500,000

Sub-Total: $ 7,990,000

Total Ongoing Resource Options: $ 15,790,000

RESOURCE OPTIONS

Ongoing - Identified in Council Resolution

Ongoing - Identified During IBA Review of Proposed Budget


Total Resources

14 Collect Retroactive Fire High-Rise Inspection Fees $ 1,000,000

15 Redevelopment Agency Dept Repayment 1,000,000

16 Implement Recovery Auditing 500,000

17 Early Retiree Reinsurance Program (ERRP) 2,000,000

Total One-Time Resource Options: $ 4,500,000

Total Resources

18-A Restore six browned-out engines in FY 2012 (three in July

2011 and three in January 2012) and two in FY 2013, in lieu

of all eight in FY 2012

$ 2,200,000

18-B Restore four browned-out engines in FY 2012 (two in July

2011 and two in January 2012) and four in FY 2013, in lieu

of all eight in FY 2012

4,300,000

$ 2,200,000 -

4,300,000

Additional Resource Options

RESOURCE OPTIONS

One-Time

Total Additional Resource Options:


Additional

Cost to Budget

A Fully restore all branch library hours to current service

levels

$ 7,400,000

B Partially restore hours at branch libraries by implementing

10 branch library pairings and "Express Library" proposal

2,200,000

C Partially restore hours at branch libraries by only

implementing "Express Library" proposal

3,400,000

A Restore Recreation Center Hours $ 3,300,000

3 Provide Funding for Fire In-Station Alerting System $ 1,700,000 -

3,400,000

4 Replenish General Fund Reserve to meet 7.5% for FY 2012 3,500,000

Total Ongoing: $ 5,500,000 -

10,700,000

Total One-Time: $ 5,200,000 -

6,900,000

1. Options to Restore Branch Library Hours (Ongoing)

2. Options to Restore Recreation Center Hours (Ongoing)

Other Options (One-Time)

RESTORATION OPTIONS


Other Issues Identified in Report

• Status of General Fund Reserve• City is unable to report current status of its

reserves due to delay in Year-End Report• Unknown whether 7% goal for FY 2011 has been

attained or maintained• Information is expected end of May, relevant to

decision regarding reserves suspension• No Appropriated Reserve included in Proposed

Budget this year, agree no purpose for it until issue of Council’s authority is resolved

24



• User Fee Review Process• Recommend a more comprehensive, broader-

based user fee review process be implemented

• Cost recovery levels for all fees should be provided to the BFC in the Fall- well in advance of the budget process

• Committee could provide early input and identify fees they would like to see addressed in the budget

25



• Deferred Capital• Five-Year funding resource reflected in

revised Outlook but not discussed in Proposed Budget

• Staff capacity to handle workload remains a concern

• Engineering will be bringing alternative delivery systems to Council

• Staff is also pursuing alternative processes for procurement

26



• Performance Measures• Last year Mayor announced suspension of

performance measures until 2013• Agreed to provide FY 2010, FY 2011 data for a

certain set of measures but no FY 2012 targets• Numerous basic measures helpful to decision-

makers are still not captured (branch library hours per week and building permits issued)

• Look forward to improvements in future including targets that match to proposed funding

27



• Managed Competition• Ongoing concerns about pace of

implementation• Consultant support for FY 2012 is reduced

$140,000, no impact on implementation expected

• Savings results from Publishing Services competition could be available prior to final budget decisions

28



• Information needs:• Budget document contains large amount of

detailed information• Some valuable information has been lost in

documents:Departmental lists of “Significant Budget

Adjustments” have been more thorough including tracking changes from the prior yearActual revenue and expenditure data for prior

fiscal years is not available29



• Residents’ Opinions on City Services Survey• First community survey was completed in

March 2010 and presented to Council in April 2010

• Gauged citizen opinions of City service priorities, satisfaction levels and budget balancing alternatives

30



• Council and IBA discussed repeating this same survey every two years to track progress

• $24,000 was budgeted in Business Office in FY 2010, no funding included for FY 2012

• Real value of a citizen survey is measuring opinions over time, if not funded in FY 2012 recommend for FY 2013

31


FY 2012 Budget Calendar

FY 2012 Budget CalendarMay 4 – 6 Departmental Budget Hearings May 9 Council Public Budget Hearing

(6pm)May 11-13 Departmental Budget HearingsMay 18 Mayor’s May Revise and FY

2011 Year-End Budget Monitoring Report Issued

32


FY 2012 Budget Calendar

May 23/24 Presentation of Mayor’s Recommended Revisions and FY 2011 Year-End Budget Monitoring to City Council

May 25 Budget and Finance CommitteeJune 2 IBA’s Final Report on Recommended

Changes to the Mayor’s Budget IssuedJune 6/7 Council considers final changes to

Mayor’s Budget/Adopts Budget Resolution

33


Questions?

34


General Fund Revenues

• Property Tax– FY 2011 Projected Growth: -2.7%– Mixed results in residential market in 2010– Total sales & prices increased in 1st half due

to tax credits; declined in 2nd once expired;– Large backlog of property assessment

appeals– Modest CPI increase will provide some buffer

35



• Property Tax

36



• Sales Tax– FY 2011 Projected Growth: 5.6%

• Year-to-date growth: 6.4%– Consumer spending & business investment

has been strong for several quarters– Job growth has resumed

• 24,700 jobs added year-over-year in March 2011– USD Index of Leading Indicators increased

1.9% in Feb., largest gain on record37



• Sales Tax

38



• Sales Tax

39



• Transient Occupancy Tax– FY 2011 Projected Growth: 6.3%

• Year-to-date growth: 8.6%– Tourism and Lodging industry is recovering– Significant indicators increased in 2010:

• Total visitors – 0.9%• Overnight visitors – 4.5%• Room Demand – 6.4%

– ADR projected to resume growth in 201140



• Transient Occupancy Tax

41

2010 2011 2012

0.9% 3.8% 2.6%

4.5% 2.6% 1.5%

6.4% 3.0% 2.8%

-2.0% 4.4% 4.6%

66.7% 68.8% 70.1%Occupancy Rate

ConVis Quarterly Travel Forecast

Total Visitors

Average Daily Rate

Room Demand

Overnight Visitors



• Transient Occupancy Tax

42


Convention Center Phase II

43

Fiscal

Year

RDA

Payment

WTC

Proceeds

TOTAL

FUNDING

2012 2,000,000$ 2,500,000$ 4,500,000$

2013 2,500,000 2,000,000 4,500,000

2014 3,000,000 1,500,000 4,500,000

2015 3,500,000 1,000,000 4,500,000

2016 4,000,000 500,000 4,500,000

2017 4,500,000 500,000 5,000,000

2018 5,000,000 - 5,000,000

2019 5,500,000 - 5,500,000

2020 6,000,000 - 6,000,000

Funding for Convention Center Phase II DS

Documents

IBA REVIEW: MAYOR’S FY 2012 PROPOSED BUDGET · 16 Implement Recovery Auditing 500,000 17 Early Retiree Reinsurance Program (ERRP) 2,000,000 Total One-Time Resource Options: $ 4,500,000